Sept. 11 (Bloomberg) -- Lloyds Banking Group Plc will
provide the TSB division it’s selling with about 40 million
pounds ($63 million) to help it attract more customers under an
agreement with British competition regulators.

Lloyds will transfer the “economic benefit” of 4 billion
pounds of mortgages to TSB as part of a plan to boost its
profitability by 200 million pounds over the next four years,
the London-based lender said in a statement today.

Lloyds, Britain’s biggest mortgage lender, is planning an
initial public offering of TSB, which comprises 632 branches, in
2014 to comply with European Union state-aid rules after
receiving about 20 billion pounds in a government bailout. The
OFT also gave its backing to Royal Bank of Scotland Group Plc’s
planned sale of branches after its government bailout.

“It is important that both divestments are able to grow
and develop their business models and strategies in the coming
years,” OFT Chief Executive Officer Clive Maxwell said in a
letter released by the Treasury in London.

The Office of Fair Trading recommended Lloyds should help
TSB increase its share of the consumer checking account market
by bolstering its balance sheet or giving it the option to
acquire more branches from its parent. Lloyds should help TSB
expand its share to 4.6 percent from as little as 4 percent
today, the OFT said.

Lloyds should make sure its contract to manage TSB’s
computer services doesn’t prevent it from competing, said the
regulator. The London-based lender earlier this week re-branded
the outlets under the TSB name in preparation for the sale.

“The group is determined to play its part in delivering a
stronger banking industry to better serve customers, support the
U.K. economic recovery and help Britain prosper,” Lloyds said
in a separate statement today.

RBS, based in Edinburgh, which received the biggest bank
bailout during the financial crisis, is weighing an IPO of 316
branches after Spain’s Banco Santander SA abandoned talks to buy
them in October.